Cruise The Crop Markets 2010 Day 1

Grain Price Outlook and Market Strategies

Cruise The Crop Markets

by John Roach

January 17 - 24, 2009

Roach Ag Marketing, Ltd.

7601 N. Federal HwySuite 265-B

Boca Raton, FL 33487

800-622-7628

jroach@roachag.com http://www.roachag.com

Grain prices set their peak of a new price plateau in 2008. The new price plateau will

remain but prices will search out the bottom of their range

again this fall, if crops are good.

Why will the new price plateau remain?

Population Growth Rates

Source: USDA Agricultural Projections to 2017.

Global Meat beef + pork + chickens & turkeysProduction, per capita consumption, and population

Source: USDA Agricultural Projections to 2017.

Dollar Index

Dollar’s value has been driving trade for the last 2 years

Index funds increasingly important beginning 4 years

Five-year moving average of world production values.

GSCI™ Components and Dollar Weights (%) (12-18-2009)

Energy 69.53 Industrial Metals 8.21 Precious Metals 3.30

Agriculture 14.71;

Wheat 3.16; Red Wheat 0.63; Corn 3.40 Soybeans 2.39; Cotton 1.15; Sugar 2.82

Coffee 0.78; Cocoa 0.38 ;

Livestock 4.26 Live Cattle 2.44; Feeder Cattle 0.46; Lean Hogs 1.36

What role did fundamentals play in 2009 grain prices?

#1 - World Soybean Crop down 27.4 million tons = 34% of entire U.S. Crop

March Intentions#2 - March Intentions

MarchFinal

#3- On May 17 only 62% of the U.S. corn crop was planted

with Illinois at 20%.

Beans were 25% planted with Illinois at 1%

Dollar IndexDollar back in decline from Feb 09 to June 09

Bears’ 1st Target

• Tight U.S. soybean ending stocks this year and tight corn stocks next year were forecast

• China building soybean reserves

• Fear of rampant inflation

• Speculative money again flowed into grain markets as traders chased beginning bull market moves

In Addition

• South American crops quit shrinking

• U.S. Dollar quit getting cheaper

• There was no inflation….yet

• China quit buying

• U.S. farmers planted more acres than expected and the weather became nearly perfect for big crops

Grain Prices Dropped from July to Sept 2009 because:

• U.S. crop experienced cold wet fall and slow harvest

• U.S. Dollar resumed its decline and inflation fear grew

• China became an aggressive buyer of beans

• Speculative fever re-ignited in the face of shrinking production, increasing bean demand estimates

Then Prices Rallied from Sept to December

What are the Fundamentals Now?

Aug forecast +31.5 MMT Nov & Dec +39.4 MMT Jan +42.58 MMT

Bean Acreage

2008 – USDA 75.7 Mil. Acres

2009 – USDA 77.5 Mil. Acres

2010 - Informa 77.0 Mil. Acres

U.S. and world inventory very tight now

China demand numbers increasing

2010 ending stocks no longer tight, but we must raise big crops in 2010

Prices should peak prior to normal March June selling season if no U.S. crop problem develops

Bean Situation and Price Outlook

FSU-12 Exports2007-8 – 27.47 MMT2008-9 – 54.71 MMT

2009-10 – 49.50 MMTU.S. Corn Exports

2007-8 – 69.89 MMT2008-9 – 51.17 MMT

2009-10 – 55.79 MMTU.S. Wheat Exports 2007-8 – 34.36 MMT2008-9 – 27.64 MMT

2009-10 – 22.45 MMT

Non – U.S. 58.9 Bu/Acre

World 80.3 Bu/Acre

U.S. 162.9 Bu/Acre

USDA 2009 World Corn Yields 12/10/09

World coarse grain and U.S. ending stocks ample - but just barely. Wheat hurting demand

U.S. ending stocks likely to increase due to smaller exports and feed offset by + ethanol

Livestock producers losing less money

We still need a big corn crop every year and should have seasonal strength in 2010

Corn Situation and Price Outlook

World wheat ending stocks are 3rd largest on record and US biggest since 1988

Prices increasingly dominated by former Soviet Union production

Index fund ownership distorting price higher and basis wider

2010 winter acreage 37.1 mil acres down 14.3% from 2009

Wheat Situation and Price Outlook

Cruise The Crop Markets 2010 Day 1

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